Generations Clothing Business - Essay Example

GENERATIONS CLOTHING BUSINESS Business goals: As conducting casual -clothing business the Generations Clothing has the following goals Selling casual clothing that suits everyone: In the initial stage of the business the products of the Generations Clothing are focused to all types of Customers. It will be giving the business an advantage of wide market for the product and popularity to the product among all kinds of customers. By focusing on the society as a whole it is easy to undertake production of differently designed clothing. The limitations of targeted marketing can be avoided by adopting this policy. 2. Products are aimed to be good quality simple and smart looking: For piercing in to highly competitive market of casual clothing the quality of the product is an important matter. The quality must be always over or in touch with the expectations of the customer. For this the Generations Clothing aimed to produce good quality products. In addition to the quality of the product they give importance to the simplicity and smart looking to the product. From the market surveys conducted by the business as a part of their business planning it is found that a major part of the customers are always like these types of products. 3. Establishing stores in Sydney: From the market research, it is found that Sydney is a best market for the casual clothing. There are various market advantages that are available in Sydney market such as lower government regulations, low rate of taxes etc. By establishing stores in Sydney the Generations Clothing can exploit these advantages and they can ensure profitable growth. 4. Brand image of low price, simple design, and good quality: The ultimate goal of the company is to create a brand image of high quality product of low price. A brand image of high quality at low price is always helpful to capture the market in the competitive market. The products should also be imaged as simply designed product. This type of brand image is helpful to attract the customers. By adopting strict cost control techniques in all levels of production and marketing process the company aimed to produce quality products at low cost. 5. Once mature create a unique sub brand to prevent risks: the mature and declining products must be replaced by new ones. In the present market environment most of the branded products are facing decline in growth rate and profit rate after they attain the maturity stage. The reason behind this phenomenon is the lack of further improvement in product quality and design. The Generations Clothing Company forecast this crucial risk and to overcome this risk they take care and prepare to present a unique sub-brand at the maturing stage of the existing product. This will be helpful for avoiding the risks related to the existing branded product. The proposed sub brand must be unique and entirely different from existing product of the company. The logo of this product should be specially designed to attract and create fans group among the customers for this product. The brand strategy adopted by other successful firms in the industry also cleverly implemented in the new sub brand product. 2. Business strategies For achieving the business goals of the Generations Clothing they prepare appropriate business strategy relating to pricing of product, cost control and creation of brand image to attain market acceptability. The business strategy adopted by the company is classified into three categories. They are pricing strategy, cost saving strategy and brand image, i.e. high quality, low price clothing. 1. Pricing strategy: Appropriate pricing strategy is essential for the success of any business. For creating the brand image of low priced product appropriate pricing policy should be followed. This type of brand image limits the company’s product’s price to a lower level. As a part of this pricing policy of Generations Clothing, they undertake the pricing of product in the initial stage of the business just to cover the operating cost. Only slight profit should be added to the product’s cost in the initial stage. They aimed at reducing the operation cost through the application of various cost control techniques. Thus they can achieve the goal of creating the brand image of low priced and quality goods. As a result of adopting this pricing policy the company has to bear even loss. Instead it is must for getting entry into the market. After creating the brand image and getting market acceptability to the product they can slowly increase the price of the product at a certain level. Through the application of cost control techniques also the profitability of the product can be enhanced. Thus they can price the product at lower level. 2. Cost saving strategy: For attaining the proposed brand image of the product, Generations Clothing has to adopt strict cost control techniques in all levels of the business. The production and marketing should be done in cheapest ways. As a part of cost saving strategy the company adopts the method of transplanting the production process in China, where the company can exploit the advantages of cheap labour and government support to the foreign industries. From the market research it is found that the production cost in China is comparatively lower than other countries. They also undertake total quality management techniques such as operational control, performance gap analysis and bench marking to ensure the quality of the product at low cost. : 3. Brand image (low price, quality clothing): For getting entry into a competitive market like the casual clothing market for which the Generations Clothing wants to enter and attaining market share the creation of a better brand image is necessary. In the casual clothing market the price of the product is an important matter affecting the customer’s buying decision. Customers always compete with the industry by forcing down the prices, bargaining for higher quality products at lower price. Thus Generations clothing aimed to create a brand image of low price high quality goods to their product. For achieving this brand image to the product they employ the tool of total quality management techniques and various cost control techniques. 3. Business Structure: The business structure followed by the Generations Clothing is of general partnership firm. The fund for the establishment of the business is equally shared by 5 partners. As a general partnership firm the responsibility is also equally shared among the partners. The entire activities of the business are under the control of a Board of directors in which the 5 partners are included. They undertake the decision making process in combined manner. Due to the mutual responsibility, the partners always take care to manage the business in profitable ways. The day to day activities are controlled by the Chief Executive Officer who is appointed by the Board of Directors. He acts as the coordinator of the four departments of the business. The departments under the control of the CEO is shown in the below diagram. 4. Key Personnel Roles and Human Resources: The Board of Directors consisting the 5 partners is the ultimate authority in the Generation Clothing business. For carrying the day to day activities a Chief Executive Officer is appointed by the Board of Directors. He takes the responsibility of managing the business as per the plan prepared by the Board of Directors. The key personnel roles of persons in each department are explained below: Human resource department: The main component of any business is its human resource. Without competent human resource no business can achieve its objectives. For this utmost care must be followed in the staff selection and further development of their personnel skills according to the needs of the business. The entire activity relating to recruitment and training of employees for the business are under the control of the Human Resource Department. For carrying the recruiting of new employees In the HRD of Generations Clothing there is a committee consisting of 3 members. They are well experienced in human resource management and are efficient to conduct selection and training of employees. They take care that the employees are better instructed and they work in the manner as prescribed by the quality control and design departments. Marketing Department: The formulation of appropriate strategy relating to the marketing of product of Generation Clothing is carried on by the Marketing Department. Under this department there is a market committee which consisted of 5 members, for carrying the market research. Due to the specific feature of casual clothing i.e. continuously changing it is important to identify the changes that have to taken place in the current period. The follow up of the existing change is not a best way. An efficient businessman always forecast the changes early and products are issued before the competitor’s action. Thus the market committee always conducts customer surveys and tries to identify their changing attitude and desire in time. Design Department: The design Department consists of 4 professional designers who are highly skilled in designing casual clothing. As per the information supplied by the marketing department with the changing customer attitude they design the products in better manner. They always try to produce uniquely designed products to sustain their customers. Product and quality control Department: The quality control activities are under the Quality Control Department. The fixing of standards with regard to quality is done by this department. Quality control techniques are employed for ensuring the quality of the products. Each of the production process is subjected to the instructions of quality department. They assure that the products produced in the business unit are in accordance with the quality standards specified by quality standards like ISO9000- 2001.A sustained management commitment to quality is assured by the quality department. The products are subjected strict quality checks and only the standardized products are send out for marketing. 5. Target Market: The targeted market of the product of Generations Clothing is customers who are in age group of 15 to 30 years and who prefer simple designs. Instead the business goal is selling casual clothing that suits everyone; the main targeted market of the product is teenagers and youngsters. 6. Marketing Strategies: For achieving the business growth in a highly competitive market like the casual clothing market A well developed marketing strategy is essential. A successful marketing strategy requires a portfolio of products and takes into account the anticipated moves of the competitors in the market. Fluctuating customer requirements and competitive forces are putting more pressure on marketing and thus appropriate marketing strategy is essential for customer satisfaction in the continuous changing environment. The marketing managers are facing many challenges in the competitive market environment. They had to forecast the changing needs of the customers and carryon the production under this estimation. A good marketing strategy should integrate an organization’s marketing goals and policies. The sensitivity of identifying the external market environment and the obtainment of sustainable competitive advantages in the market place is important factors that help to formulate the marketing strategy. Anticipating the competitor’s actions is the key determinant of success of a marketing strategy. For these reasons the Generations Clothing accepts different types of marketing methods through which they can achieve the business goals of profitability and growth. The marketing strategy followed by the Generations Clothing is explained below T V promotions Developing own websites: Fashion magazines Membership In case of casual clothing products the adoption of TV promotions is the most appropriate method as it helps to present the unique designs of the brand in time for attracting the customers. Most of the customers are influenced by TV adds. By developing own websites the business will get a prestige. Through this they can present their business features and its mission to the customers. By describing the quality assurance methods adopted by the business through its website they can able to inform the customers. The introduction of newly designed products in the market by the business can be easily transmitted to the customers through its website. Fashion magazines should also adopted for the presentation of unique designs of the business. Generations Clothing presents their new series of designs through Fashion shows. 7. Existing and potential risks: .Because of the maturity stage of the industry of casual clothing and presence of a number of firms in the industry the firms are facing various risks. The major risks existing in the industry is explained below. Rivalry among existing firms: The competitive moves of the business unit like low price should affect the competitors in the market and they may be retaliated. The price changes and promotional measures may be followed by the competitors and this will affect the further growth of the business. The customer service of the business also may be imitated by the competitors. Thus the competitor’s rivalry is a serious risk in the market. Small companies need to have the resources to cope with the rapid changes in clothing trends and styles. Threats of entrants: A prospective industry like casual clothing often faces threats of new entrants. As a result of more firms in the industry the profitability and growth of the existing firms must be reduced as a result of the competitive market hypothesis. Potential competition tends to be high if the industry is profitable or critical. The advantages of economies of scale of production to big production unit always affect the smaller ones in the industry. A growing number of small manufacturers that significantly tightens the competition. Threats of substitutes: The power of substitute products is an important force of competition. The availability of substitute products in the market limit the potential returns in an industry by placing a ceiling on the price the firm can profitably charge. Bargaining power of buyers: Buyers are potential competitors in the casual clothing business. They always want quality product at low price. They always try to reduce the price of the product and even though the product is charged limited prices the customers are not fully satisfied. They often look for the discounts and other benefit from the supplier. The existing and potential risks faced by Generations Clothing with regard to the product marketing are the following. Non unique designs Uncontrollable price Competitors Threats of substitutes Non unique design: Due to the highly changing customer trends, the Generations Clothing cannot supply products with unique designs. The branded image of the business of simple and smart looking products is also restricting them to produce different variety of products. The existing designs of them are only with slight changes from their earlier products and customers are not accepting this in wide. Uncontrollable price: Due to the increasing cost of production as a result of inflation and other factors in the economy Generations Clothing forced to increase the price of the product at higher level. This is against the branded image of the Generations Clothing and this affect the business badly. They cannot control the price at the minimum level. Skilled labour is required to be highly paid. Due to this they cannot employ much labour of highly skilled. Competitors: The keen competition in the market also affects the further growth of Generations Clothing and they had to produce products different from their branded image Small businesses face an increasing competition from big firms in market strength and economies of scale. They want to compete with other big firms in the industry producing similar types of products. Due to the limited designs and colours matching with the brand image of the business, they want to continue the production of existing product with slight changes. Threats of substitutes: A crucial risk faced by the Generation Clothing is the availability of substitute products in the market. Due to this the consumers have more choices. The substitute products reduced the existing market share of Generations Clothing. It also affects the profitability and further growth of the business. 8. Risk management (Demons Clothing): Introduction of a new product in the market is a risky process. In every development stage of new product there involves a high degree of uncertainty about its market acceptance and profitability. For assuring success in new product introduction it requires a through understanding of the prominent risks that has to be faced by the new product and its proper management. There is a clear need to evaluate new product initiatives systematically and make accurate decision under uncertainty. To overcome the decline in growth and profit rate of existing matured product it must be replaced by newer products. By recognizing the necessity and advantage of regularly developing new products and to overcome the impact of brand image of low cost quality, simple and smart looking product to the Generations Clothing, they had decided to introduce a new brand of clothing under the brand name Demons Clothing and accepted cartoons as the designs of the new product. They accept this methodology for the reason that it may helpful to create fans among the customers for the product. The strategy followed by other successful firms are also force them to accept this strategy. By registering these cartoon characters as the trade mark of Demons Clothing they can price the product at better level. New products can be failed if inadequate strategy is followed and the risks of innovation are as great as the rewards. The key to successful innovation lies on developing better organizational arrangements for handling new product ideas and developing sound research and decisions procedures at each stage of the new product development process. To undertake this concept in view the Generations Clothing introduced their new branded product after taking market research activities risk analysis. Risk management Strategies For the management of risks involved in the introduction of Demons Clothing the basic strategy followed is summarized as below; Marketing strategies to make the characters popular Once the characters are popular it will be easier to control prices Manufactures side products like wallets, hats, shoes, key chains etc. Developing loyal customers (fans) 1. Marketing Strategies to make the character popular: The adoption of the trade mark will help Demons Clothing to differentiate their product from those of competitors. A brand makes it easy for the consumers to identify the product. Branding also helps them to control their market because buyers will not confuse one branded product with another. “In any form, branding can be used to create brand familiarity among consumers in terms of brand recognition and brand preference. The advantage of using branding effectively is both for consumers as well as marketers. For instance it becomes easy for a customer to choose preferred brand among 1000s of other items just because of famous well recognized symbol, word or trade mark that can not be possible with out effective branding.” (“Creating Brand Awareness through Effective Brand names and Symbols “by Verena Veneeva) http://ezinearticles.com/?Creating-Brand-Awareness-through-Effective-Brand-Names-and-Symbols&id=230224. For popularizing the trademark of Demons Clothing they conduct vast advertising campaign. 2. Once the characters are popular it will be easier to control prices: By popularizing the characters of Demons clothing they can overcome the limitations of pricing, because branding reduces the price comparisons as it is hard to compare prices of two items with different brands. Hence they have the freedom to charge the desirable price to their products. They can even charge premium over its brand. Manufactures side products like wallets, hats, shoes, key chains etc. Instead of producing casual clothing Demons clothing plans to produce side products like wallets, shoes etc and the brand will help them to market it easy ways. The product expansion will be helpful to exploit the popularity of brand of Demons clothing. Developing loyal customers: The creation of loyal customers to the product is a strategic competitive advantage to the business. It is not an easy task. For creating loyalty customers Demons Clothing adopts the methodology of delight the customer. They always taken into account the interests of the consumer. 9. BUSINESS TIMELINE Month 1: Prepare business plan, and estimate the initial fund requirement, choose the appropriate sources of fund raising, and ensure the availability of the fixed assets for the business. Choose a business name and undertake its registration process. Month 2. Select the suitable market place in Sydney by considering the value and market advantages. Take steps to acquire the land for constructing the shops. Month 3. Determine shop lay out and design. Take steps to prepare plant lay out in China. Month 4: Purchase the shop facility and equipments. Commence the work related to installation of the production plant in China. Month 5: Determine the span of management of the business and commence the recruiting process of the staff personnel to departmental heads. Month 6: Choose agencies: CPA, consultant, insurance companies, Attorney’s and brokers for meeting the legal requirements and other related activities. Month 7: Determine the product features and the pricing strategy, and marketing strategy to be followed for the product. Month 8: Prepare the advertising strategy. Choose the advertising Medias. Month 9: Take steps to get business license as per the legal requirements in Sydney. Month 10: Create better relations with the local banks to ensure the credit availability in time. Month 11: Human resource requirement for the business are estimated and conduct recruitment process. Month 12: Arrangement for better training to employees .Determine the wages, salaries and other financial benefits to be payable to employees, determine the business the business hours. Month 13: Enlarge the business by opening 10 more shops. 10. Examples of Balance sheet and Cash flow Statement BALANCE SHEET OF THE GENERATIONS CLOTHINGS (as on 31st Dec.2007) Liabilities Amount (in AUS $) Assets Amount (in AUS $) Owned Fund Loans and advances Reserves and Surplus Bills Payable Creditors Provision for taxation 1000000 400000 120000 150000 170000 50000 Fixed assets: Land and Building Investments Current Assets: Cash Debtors Bills Receivables Bank 600000 750000 70000 300000 430000 190000 2520000 2520000 CASHFLOW STATEMENT OF GENERATIONS CLOTHING (for the year 2007) Read More